When Steven Vicinanza got a letter in the mail earlier this year informing him that he needed to pay $1,000 per employee for a license to some “distributed computer architecture” patents, he didn’t quite believe it at first. The letter seemed to be saying anyone using a modern office scanner to scan documents to e-mail would have to pay—which is to say, just about any business, period.

If he'd paid up, the IT services provider that Vicinanza founded, BlueWave Computing, would have owed $130,000.

The letters, he soon found out, were indeed real and quite serious—he wasn't the only person getting them. BlueWave works mostly with small and mid-sized businesses in the Atlanta area, and before long, several of his own customers were contacting him about letters they had received from the same mysterious entity: "Project Paperless LLC."

"[Hill] was very cordial and very nice," he told Ars. "He said, if you hook up a scanner and e-mail a PDF document—we have a patent that covers that as a process."

It didn’t seem credible that Hill was demanding money for just using basic office equipment exactly the way it was intended to be used. So Vicinanza clarified:

"So you're claiming anyone on a network with a scanner owes you a license?" asked Vicinanza. "He said, 'Yes, that's correct.' And at that point, I just lost it."

Vicinanza made the unusual choice to fight back against Hill and “Project Paperless”—and actually ended up with a pretty resounding victory. But the Project Paperless patents haven’t gone away. Instead, they’ve been passed on to a network of at least eight different shell companies with six-letter names like AdzPro, GosNel, and FasLan. Those entities are now sending out hundreds, if not thousands, of copies of the same demand letter to small businesses from New Hampshire to Minnesota. (For simplicity, I'll just refer to one of those entities, AdzPro.)

Ars has acquired several copies of the AdzPro demand letter; the only variations are the six-letter name of the shell company and the royalty demands, which range from $900 to $1,200 per employee. One such letter, in which AllLed demands $900 per worker, is published below. The name of the target company has been redacted. Sources that provided the letters are concerned that speaking on the record about their case could result in additional attention or threats from the patent owners.Led Letter.final.redacted

Vicinanza’s experience puts him at the heart of a type of "patent trolling" that has taken off in the past year. The Project Paperless via AdzPro letter-writing campaign is a kind of lowest-common-denominator patent demand. Patent-licensing companies are going after the users of everyday technology rather than their traditional targets, the tech companies that actually make technology. This year, more than ever, trolls have moved beyond tech in a big way.

Smaller and smaller companies are being targeted. In a paper on “Startups and Patent Trolls,” Prof. Colleen Chien of Santa Clara University found that 55 percent of defendants to patent troll suits are small, with less than $10 million in annual revenue. Even in the tech sector, a full 40 percent of the time, respondents to patent threats are being sued over technology that they use (like scanners or Wi-Fi) rather than their own technology.

Project Paperless and its progeny don’t have any interest in going after the Canons and the Xeroxes of the world. After all, they have patent lawyers on payroll already and are in a far better position to push back. Rather, Hill wanted to collect royalties from BlueWave and its customers.

Project Paperless' spawn—AdzPro, AllLed, GosNel, and the others listed above—exemplify the new strategy. They send out vast quantities of letters, mainly to businesses that never could have imagined they’d be involved in any kind of patent dispute. They send them from anonymous and ever-changing shell companies. And at the end of the day, they either file only a few lawsuits—as Project Paperless did—or none at all, which has been the AdzPro strategy thus far.

“Going after the end users may ultimately be more lucrative for them,” said one patent litigator at a technology company that's closely monitoring the AdzPro situation. “If they extract a small amount from each possible end user, the total amount might well end up being a much larger sum than they could ever get from the manufacturers. The ultimate pot of gold could end up being much bigger."

"Atlanta's Best Workplaces" become a lot less fun

Steve Vicinanza.

As a services provider to other businesses—who often sold scanners as part of his package—Vicinanza was well-positioned to get some sense of the scope of the Project Paperless campaign. He personally had conversations with about a dozen recipients of the letters and he suspects that about 50 to 100 companies in the Atlanta area received a letter. Another batch was sent out in Virginia.

Vicinanza noticed a few of his customers who had been threatened had been on the “Atlanta’s Best Workplaces” list published annually by the Atlanta Journal-Constitution. The “best workplaces” list included the number of employees each business had, which would have been useful to Project Paperless lawyers in calculating their demands. These were always on a per-employee basis.

Working backward off the “best workplaces” list, Vicinanza was able to get in touch with several other Project Paperless targets, suggesting that Project Paperless lawyers were indeed targeting companies based on the list.

Reactions to the letters varied. “Without question, some people were livid,” said Vicinanza. “Some of the smaller ones were scared out of their wits, in addition to being livid.”

Some were ready to fight back, while others had no intention of doing so. One mid-sized Atlanta business in the process of being acquired by a major Silicon Valley tech company paid the Project Paperless demand, no questions asked. Some companies just ignored the letters; others talked to an attorney. It isn’t clear the companies that did speak to their lawyers about the situation actually fared better.

“The patent attorneys typically have a whole different set of objectives,” said Vicinanza. “Now they’re in settlement mode. If the company does end up getting sued and the lawyer said ‘ignore them,’ a company could find themselves paying treble damages. Even my attorneys told me, settle it, you’re crazy to fight.”

But that wasn’t Vicinanza’s style. “I’m an IT guy, so I read the patent—and I was just appalled that this could even be called a patent.”

Project Paperless has four patents and one patent application it asserts, all linked to an inventor named Laurence C. Klein. “It was a lot of what I’d call gobbledygook,” said Vicinanza. “Just jargon and terms strung together—it’s really literally nonsensical.”

Readers wishing to judge for themselves can take a look at the asserted patents, numbers 6,185,590, 6,771,381, 7,477,410 and 7,986,426. AdzPro also notes it has an additional patent application filed in July 2011 that hasn’t yet resulted in a patent. The patents may have been useless from a technologist’s perspective, but fighting them off in court would be no small matter.

“My lawyer said, even if you win, this case will cost a million dollars. I said, I don’t think it will—but I’d rather pay a million than pay these guys $200,000.”

In 15 years of being in business, BlueWave had never been involved in a lawsuit of any kind. “This sort of thing is detrimental to the whole industry,” said Vicinanza. “If everybody just rolls over, that just encourages them [patent trolls] to keep going.”

In March, the ball dropped and Project Paperless’ threats against BlueWave turned into an actual lawsuit. As he promised, Vicinanza didn’t settle. Instead, he spent $5,000 on a prior art search and sent the results to the Project Paperless lawyers. He also hired a new lawyer, Ann Fort, who filed a third-party complaint against four of the companies that actually made the scanners—Xerox, Canon, Hewlett-Packard, and Brother. That could have compelled the manufacturers to get involved in the case.

In the end, Hill and his fellow lawyers at his small Atlanta firm, Hill, Kertscher and Wharton, didn’t have a lot of fight in them. Two weeks after he filed the third-party complaint, Project Paperless dropped its lawsuit. No settlement, no deal—they just went away. (As a result, the scanner makers never actually came to court.)

When Project Paperless dropped its suit, that was the end for Vicinanza and Blue Wave. But Vicinanza was proud of standing up. He put out a press release describing his saga as a “small victory in the war against patent abuse.”

BlueWave’s win was hardly the end of the Project Paperless patents, however. Today, those patents are at the heart of an even more expansive campaign to get cash out of America’s small businesses for using everyday office equipment.

Steven Hill wouldn't comment on Project Paperless, saying only that his firm declined to discuss what was a “client matter.” Hill also refused to comment on the new entities sending out AdzPro letters today, or any links he and his partners have to those companies.

240 Reader Comments

I would have thought if someone was extracting pain and suffering like these patent trolls do, and their claims are proven invalid, the someone could be sued for damages. If such a suit could proceed as a class action and damages were awarded according to the collective pain and suffering caused to the someone's defendants, then the frivolous patent trolls would be deterred. I would want to see the troll's attorneys punished separately and in addition, but that's harder. There are, of course, bar association ethics boards and the like.

How hard is setting up the law so that all this can happen when it's justly deserved?

The problem is the backlog of patents (such as these) from the 90s. It helps to inform the patent office on technical matters, but there are still a huge amount of patents with questionable validity and you can't retroactively say the length of coverage is to be reduced.

You mean a lot of people would be pissed off. THat's not the same as "you can't." We absolutely can reduce the length, even retroactively, if we really want to. Given that even now you can have your patent in limbo for years before you find out whether or not it's valid, this doesn't seem a radical change to me. But, that said, I suppose you could measure the newly-shortened duration from the passing of the law or the granting of the patent, whichever is later, if there were a need. Personally, not convinced there is--yes, individual companies would get caught up in this, ones that weren't doing anything wrong or abusing the system, but the system as a whole would be better off without any sort of grace period or grandfathering, IMHO.

Personally, I'm somewhat baffled as to how ignoring the letters can have an average cost of around $3000...one would hope that ignoring the letters would lead to being forgotten about as not worth the time and money required to pursue your particular extortion settlement cash.

Dan Aris

Well, if 1 firm ignored the letter and then was actually taken to court for $X dollars, and another hundred firms ignored them and nothing happened, that could easily average out to $3000. I think a mode would be more useful statistic than mean in this case, however.

There are some new procedures under the AIA for slamming the banhammer on useless patents and patent trolls. They are quite expensive, and it's still early - they've only been around since September - but they are promising.

Piss off the wrong party and a typical patent troll's experience might go something like this:

1. Patent troll gets issued a useless patent (this happens too often, but I digress).2. Patent troll uses useless patent to threaten Company A with an infringement suit.3. Company A ignores threats, and patent troll sues.4. Company A has astute counsel that remembers one of the new post-grant proceedings under the AIA, and files an appropriate petition for, e.g., post grant review (PGR) of the patent in question.5. Patent troll tries to run away by withdrawing the complaint.6. Company A laughs and continues with the PGR process.7a. Patent troll disappears, doesn't file any responsive briefs/motions, and the patent is invalidated, or7b. Patent troll tries to fight, but since the patent is so obviously ... well, obvious (or even anticipated) by the prior art, that no arguments can save them ... and the patent is invalidated (and hopefully the troll goes bankrupt from the hefty attorney fees).8. Rinse and repeat.

It's not ideal, but the new proceedings do provide tools to fight fire with much bigger fire.

There should be an 9 and 10.9. Patent troll founder needs to be beaten repeatedly by all the people it tried to sue10. Then should be left to dry on a pit of lava with fire breathing sharks

The man who invented the intermittent windshield wiper had his patent willfully violated by every single major auto company. He sued all of them and won tens of millions but it took him decades in court to get justice.

If only he had known that he could have simply mailed out a few hundred million letters to registered vehicle owners demanding ten or twenty bucks each he would have gotten his money years earlier.

Of course that's a completely stupid idea, but here we have some scumbags who didn't even invent anything basically committing extortion and mail fraud and they appear to be getting away with it.

PS - if you are a business owner and are actually stupid/gullible/cowardly enough to send money on anything like this you are probably paying bogus invoices for toner cartridges and yellow page ads too. If you are paying an attorney who advises you just to pay on scams like this then you are double stupid.

The employees at the patent office that were involved in approving these patents need to lose their job and possibly be fined a heavy penalty. This garbage needs to be stopped at the source, which isn't the filing of ridiculous patents, it's the approval of them.

There needs to be real consequences for patent office employees to worry about in order to get them to actually do their jobs properly.

The employees at the patent office that were involved in approving these patents need to lose their job and possibly be fined a heavy penalty. This garbage needs to be stopped at the source, which isn't the filing of ridiculous patents, it's the approval of them.

There needs to be real consequences for patent office employees to worry about in order to get them to actually do their jobs properly.

And the chances are, the trolls are doing some "creative" interpretation of the patents they have as well.

There are some new procedures under the AIA for slamming the banhammer on useless patents and patent trolls. They are quite expensive, and it's still early - they've only been around since September - but they are promising.

Piss off the wrong party and a typical patent troll's experience might go something like this:

1. Patent troll gets issued a useless patent (this happens too often, but I digress).2. Patent troll uses useless patent to threaten Company A with an infringement suit.3. Company A ignores threats, and patent troll sues.4. Company A has astute counsel that remembers one of the new post-grant proceedings under the AIA, and files an appropriate petition for, e.g., post grant review (PGR) of the patent in question.5. Patent troll tries to run away by withdrawing the complaint.6. Company A laughs and continues with the PGR process.7a. Patent troll disappears, doesn't file any responsive briefs/motions, and the patent is invalidated, or7b. Patent troll tries to fight, but since the patent is so obviously ... well, obvious (or even anticipated) by the prior art, that no arguments can save them ... and the patent is invalidated (and hopefully the troll goes bankrupt from the hefty attorney fees).8. Rinse and repeat.

It's not ideal, but the new proceedings do provide tools to fight fire with much bigger fire.

It's not ideal. To companies that hold millions in reserve "just in case", it's fine. But these kind of trolls never, ever go after those kind of companies: at least until they have a sizable war chest. So in effect, the process won't work.

What still strikes me as annoying and arrogant about the patent process is that the concept of patenting is meant to foster progress, to encourage the underfunded scientist or inventor to keep inventing, safe in the knowledge that their creation is protected. But if it takes big money to actually enforce - or defend - then it's not about progress at all; it's about money. And all you need to win in that case is money - quite opposite of the original intention, imo.

The real problem is the difference between American civil and criminal actions. In a criminal matter you can "stand mute"--make no defense whatever--and a default plea of not guilty is entered. The judge may, possibly, throw out the case. You walk if he does. Out-of-pocket expenses: $0.00 if you did it pro se. Civil is another matter. If you do not respond the other side wins by default. Out-of-pocket expenses: $?.

There are only two recognized legal specialties: maritime law and patent law. Both areas are esoteric and their practitioners fetch big bucks. Even the smallest patent matter would cost around $500K in up-front fees. Fighting something like this in court is unthinkably expensive for a small business. Patent trolls know this quite well. Form letters are simply an end run, a form of legal extortion. See my post from yesterday regarding an effective counter-strategy.

What is really necessary is a revised system that does not recognize either process or algorithmic patents independent of some special-purpose machine that they control.

I am not sure what I find more depressing about this article and the fact that someone is pushing on small businesses (home users cannot be far behind), or the fact that such patents are being issued. I will be really interested when they try to enforce this patent against the US government, who uses this process every day across thousands of sites and millions of employees...

I have a few patents, but could have considerably more except that I try hard to make sure the patents are valuable, inventive and defendable. The patent process is clearly broken.

This is criminal. There is no way this holds up in any court. Everybody knows that. You can't sue a customer of a legally bought product over patents it might be covering. Otherwise we'd all be bancrupt, considering the millions of patents involved in cars, computers and household appliances.

Threatening a lawsuit without a chance of success is EXTORTION. They only cited patents to avoid being obviously frivolous.

It only works because in the U.S., the losing side doesn't have to pay the winning side's expenses. This has some benefits, but it does encourage this kind of criminal behavior, because at the end of the day, Paperless can just go away. No financial backlash pending.

And for the victims it's: pay 50k for the extortion or 100k for the trial that rids you of the extortion.MADNESS!

Thank you for pointing out that this is an American disease.

Americans need to fix their broken legal system by getting rid of this mad litigation system & getting rid of software patents which are demonstrably a failure.

Ah.. Americans also need to get rid of the guns from their society to but the world knows they will never do any of these things & continue down the path of societal destruction to oblivion.

It's not ideal. To companies that hold millions in reserve "just in case", it's fine. But these kind of trolls never, ever go after those kind of companies: at least until they have a sizable war chest. So in effect, the process won't work.

Yeah, if they tried trolling it where I work, they'd be asking for 65 million dollars, and you can be darn sure we'd be pursuing all the avenues available to fight it. But they never do that, do they... Sigh.

What really needs to happen is for the patent trolls to accidentally sue a business that is wholly or partially owned by a Member of Congress. I think that is going to be the only way to actually get Congress involved.

What really needs to happen is for the patent trolls to accidentally sue a business that is wholly or partially owned by a Member of Congress. I think that is going to be the only way to actually get Congress involved.

Actually, there might be a good way of getting their attention in that...Identify small businesses owned by congresscritters or their spouses or children.Send a copy of one of these letters to said business with a note asking, in effect, what would they think about getting a letter like this?Anyone running a small business should immediately recognize the extortion and danger the threats of litigation pose said business - presumably word would get to their congresscritter family member.That might help the situation a little.

Hopefully these people are being investigated for extortion or racketeering.

i quit using a scanner for documents as a student 2 yrs. ago. i use a camera mounted on a conduit frame and send the image as a document. the cost in determining a digital image vs a scanned image should alert these ppl to the futility in their quest.the world if full slayerwulfe cave

please forgive but i'm not very impressed by the 'intelligence' of the casual observer and the lack of it in their commentary. in my current system i can do 8' X 5' what scanner can compete with that at 18 mega pix. i realized i was an idiot in 2007 when i purchased my first computer and an hp c 7180 that i gave it away in 2010. i will not be an idiot anymore, i've gone totally digital.slayerwulfe cave

they’ve been passed on to a network of at least eight different shell companies with six-letter names like AdzPro, GosNel, and FasLan.

If there are multiple shell companies sending out demand letters, it sounds like a recipient could raise legitimate questions about whether the shell company that's demanding money from them is really the legitimate owner of the patent, and subpoena the whole bunch of them and a few other John Does into court for discovery.